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Risk management and controls
To ensure Absolute Return Global Bond Strategies remain within agreed risk limits, we employ an extensive risk management infrastructure. There are four distinct groups involved in the risk management process:
Risk and Exposures Committee – approve all investment instruments and counterparties that may be used with ongoing monitoring of exposures
Fixed Income Team – an integral part of the Fixed Income process is to provide ongoing insight on investment risk for each strategy, both in isolation and on its diversification benefits to the overall fund. We utilise industry standard systems UBS Delta and Risk Metrics to measure and monitor risk and stress scenarios for the portfolio.
Investment Risk Team – our Investment Risk Team works independently of the MAI Team and Fixed Income Team and are responsible for monitoring the performance and risk characteristics of all of the portfolios managed at Standard Life Investments
Global Investment Specialists – responsible for ensuring investors’ interests are being served by the asset managers.
Investment risk budgeting - not traditional asset allocation
Absolute Return Global Bond Strategies adopts a wide array of derivative-based market exposures, and we therefore use investment risk budgeting to implement our broad range of investment strategies. This allows us to monitor all of our investment strategies on a consistent basis and is more informative than traditional asset allocation reporting. In managing Absolute Return Global Bond Strategies, we apply concentration limits to ensure that no one strategy dominates the portfolio’s risk profile. A strategy risk limit of 40% of any one aggregate strategy is applied, i.e. a maximum 40% exposure to credit-based investment strategies.